Tucows Reports Continuing Strong Financial Results for the Third Quarter of 2014

— Quarter Highlighted by Net Earnings of $0.24 Per Share, Continued Momentum at Ting —

TORONTO, November 12, 2014 – Tucows Inc. (NASDAQ:TCX, TSX:TC), a provider of network access, domain name and other Internet services, today reported its financial results for the third quarter ended September 30, 2014. All figures are in U.S. dollars.

Summary Financial Results
(In Thousands of US Dollars, Except Per Share Data)

3 Months Ended Sept. 30, 2014 (unaudited) 3 Months Ended Sept. 30, 2013 (unaudited) 9 Months Ended Sept. 30, 2014 (unaudited) 9 Months Ended Sept. 30, 2013 (unaudited)
Net revenue 38,874 35,637 108,865 96,795
Income before provision for income taxes and change in fair value of forward exchange contracts 4,072 3,565 7,462 4,944
Net income 2,691 2,593 4,515 3,258
Net earnings per common share¹ $0.24 $0.24 $0.40 $0.32
Net cash provided by (used in) operating activities 5,014 3,664 6,110 7,052

¹ Net earnings per common share reflects the 1-for-4 reverse split of common shares that became effective December 31, 2013.

Summary of Revenues and Cost of Revenues
(In Thousands of US Dollars)

Revenue Cost of Revenue
3 Months Ended Sept. 30, 2014 (unaudited) 3 Months Ended Sept. 30, 2013 (unaudited) 3 Months Ended Sept. 30, 2014 (unaudited) 3 Months Ended Sept. 30, 2013 (unaudited)
Domain Services
Wholesale
OpenSRS Domain Service 21,880 22,003 18,230 18,581
Value-Added Services 2,350 2,606 576 485
Total Wholesale 24,230 24,609 18,806 19,066
Retail 2,687 2,143 1,197 946
Portfolio¹ 2,208 4,167 189 660
Total Domain Services 29,125 30,919 20,192 20,672
Network Access Services (Ting) 9,749 4,718 5,794 3,597
 
Network, other costs 1,139 1,193
Network, depreciation and amortization costs 172 176
Total revenue/cost of revenue 38,874 35,637 27,297 25,638

¹Portfolio revenue for Q3 2014 and Q3 2013 includes the net amounts received from the previously announced confidential arrangements related to the Company’s withdrawal of its application under the ICANN New gTLD Program for .group, and .media and .marketing, respectively.

“In the third quarter we again saw the growing contribution from Ting in our financial results as our Domain Services businesses continued to deliver consistent, reliable performance,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “We achieved net earnings of $0.24 per share, bringing net earnings for the year-to-date to $0.40 per share, surpassing our total for the entire 2013 year. Consolidated gross margin increased to 26% from 21% a year earlier, excluding the Portfolio group, which benefited from atypical contributions in both quarters.”

“Ting continued its strong momentum in customer acquisition, adding almost 11,000 accounts and more than 17,000 devices.”

Net revenue for the third quarter of 2014 increased 9% to $38.9 million from $35.6 million for the third quarter of 2013.

Net income for the third quarter of 2014 was $2.7 million, or $0.24 per share, compared with $2.6 million, or $0.24 per share, for the third quarter of 2013. Net income for both the third quarters of 2013 and 2014 included the contribution of confidential arrangements related to the Company’s withdrawal of certain of its applications under the ICANN New gTLD Program.

Cash and cash equivalents at the end of the third quarter of 2014 were $13.6 million, compared with $14.2 million at the end of the second quarter of 2014 and $11.5 million at the end of the third quarter of 2013. During the third quarter of 2014, the Company generated cash flow from operating activities of $5.0 million, as well as $1.1 million from the proceeds of stock options. This was partially offset by the use of $5.4 million for the repayment in full of the Company’s bank loan and $1.1 million for the repurchase of shares under the Company’s ongoing share buyback program.

Conference Call

Tucows management will host a conference call today, Wednesday, November 12, 2014 at 5:00 p.m. (ET) to discuss the Company’s third quarter 2014 results. Participants can access the conference call by dialing 1-888-231-8191 or 647-427-7450 or via the Internet at http://www.tucows.com/investors.

For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 416-849-0833 or 1-855-859-2056 and enter the pass code 21916055 followed by the pound key. The telephone replay will be available until Wednesday, November 19, 2014 at midnight. To access the archived conference call as an MP3 via the Internet, go to http://www.tucows.com/investors.

About Tucows

Tucows is a provider of network access, domain name and other Internet services. Ting (https://ting.com) is a mobile phone service provider dedicated to bringing clarity and control to US mobile phone users. OpenSRS (http://opensrs.com) manages over 13 million domain names and millions of value-added services through a global reseller network of over 13,000 web hosts and ISPs. Hover (http://hover.com) is the easiest way for individuals and small businesses to manage their domain names and email addresses. More information can be found on Tucows’ corporate website (http://tucows.com).

This release includes forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995 including statements regarding our expectations regarding our future financial results and, in particular, our expectations for Ting and its impact on our financial performance. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements, including the acceptance of Ting in the market. Information about other potential factors that could affect Tucows’ business, results of operations and financial condition is included in the Risk Factors sections of Tucows’ filings with the Securities and Exchange Commission. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All forward-looking statements are based on information available to Tucows as of the date they are made. Tucows assumes no obligation to update any forward-looking statements, except as may be required by law.

TUCOWS is a registered trademark of Tucows Inc. or its subsidiaries. All other trademarks and service marks are the properties of their respective owners.

Contact:

Lawrence Chamberlain
TMX Equicom
(416) 815-0700 ext. 257
lchamberlain@tmxequicom.com

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